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For U.S. multinational companies, creating work rules and personnel policies that not only comply with U.S. federal and state law but also the laws of each jurisdiction outside of the United States where they operate is a major challenge. Add to the equation the need to sync a company’s corporate values with foreign cultures and mores, and you have a very delicate and difficult task at hand. There simply is no one-size-fits-all answer.
As an example of the global complexities and nuances at play, in the U.S. the commonplace practice (based on jurisdiction-specific judicial precedent) is that employee handbooks do not form employee contracts. However, in other countries, regardless of disclaimer language, handbooks may be viewed as binding contracts. The question then becomes, how does a business best structure such an essential, strategic document, which employees literally receive moments after first walking through the door?
As a starting point, American companies employing U.S. citizens at facilities abroad need to account for certain statutes, such as federal discrimination laws and the Foreign Corrupt Practices Act, which apply to those citizens regardless of their workplace location. Then, care must be taken to ensure that jurisdiction-specific labor and employment laws for a facility are included. This is easier said than done. When doing business in Germany, complying with European Union law is not enough; you must also look to the laws of Germany as well as each of its 16 states. When employing workers in Canada, a company must consider Canadian federal labor law, along with the laws of the country’s 10 provinces and three territories. While Australia has extensive federal labor laws, you must comply, too, with the employment and labor laws in one or more of its six states and several territories. Globalization has standardized much of the world, but labor and employment law remains inherently local.
To ensure full legal compliance, organizations must establish a team to conduct an employment law audit, which is overseen by legal counsel. While many countries do not allow the attorney-client privilege to protect this process, U.S. state laws provide such protection. So it is imperative that this process be overseen and managed by a skilled employment lawyer based in the United States. The audit’s purpose is to identify all applicable law and compare and contrast that law to a company’s own personnel policies, procedures and practices—ranging from recruiting to hiring to performance management to layoffs and terminations.
On a global level, most organizations, once they have identified and corrected potential areas of concern, will then put together an omnibus set of work rules that will apply worldwide to ensure all employees are treated consistently and to minimize confusion over which rules apply where.
A Global Code of Conduct
One of the greatest challenges employers face is determining what to do in situations where they voluntarily choose to apply broader protections than currently exist in a given jurisdiction. For example, a California-based company that is required to comply with state laws banning discrimination based on sexual orientation and gender identity is faced with a quandary as to how to enforce those laws at facilities based in Muslim countries, where homosexual acts are often criminalized. Even if the law of a particular jurisdiction doesn’t criminalize the behavior, local cultures and mores may frown upon gay, lesbian and transgender individuals. Should the American company, nevertheless, impose U.S.-based laws in those jurisdictions when they are not legally required to do so? Can, or should, a company tolerate religious or ethnic discrimination in a jurisdiction where no anti-discrimination laws exist or where certain ethnic or religious preferences are either common or encouraged? And what should an American company do when one of its employees and his or her domestic partner (or same-sex spouse) wish to be transferred to work in that country? These present both complicated legal issues and a vexing employee relations challenge.
When considering all of these issues and conflicts, a business should determine what rules and standards of conduct are non-negotiable regardless of where the behavior occurs. Developing a comprehensive global code of conduct will successfully balance compliance with the law and a company’s corporate culture and behavioral standards. In many cases, education and training must be conducted in each jurisdiction so that employees can fully appreciate the importance of these issues to the company and learn how they are expected to behave. For instance, sexual harassment remains widespread in parts of Latin America and Asia. Even though local law may not address this conduct and the culture may tolerate it, it is critical for a U.S.-based company to teach its local employees what it considers to be acceptable behavior.
Today, even in the U.S., companies are increasingly grappling with issues in this vein, such as recognition of same-sex marriages and partnerships. Some companies have decided to extend benefits to same-sex spouses and partners, regardless of the state law in which an employee is based. Others have opted to offer benefits to same-sex spouses and partners only in states where they are required to do so.
For a historical perspective on such considerations, one can look to San Francisco-based Levi Strauss & Co., which was expanding its operations and poised to open a factory in Virginia in the early 1960s. A key condition on which the company insisted was that the factory be racially integrated in accordance with its other facilities throughout the country. This move preceded Virginia government mandates on this issue; however, the local government yielded to the company, and the factory opened.
A global code of conduct, woven into an employee handbook, should be viewed as an ever-evolving document influenced by developing laws, defined company values and changes in local cultures and customs.
It is essential that a company establish a robust in-house infrastructure or employ a trusted external network of seasoned legal counselors and human resource professionals in each jurisdiction in which it operates. These resources will help an organization ensure its compliance with applicable, jurisdiction-specific laws and establish a global code of conduct, as well as help the employer understand and be sensitive to critical cultural mores and values.
For instance, in Asia gift-giving is customary on the occasions of marriage and death. This presents a tricky situation, at times, as company policy may dictate that employees cannot give or receive gifts from customers, vendors or suppliers. However, refusal of such an offering may be interpreted as a hostile or insulting gesture. Businesses, therefore, may very well need to allow for varying limits on gifts.
In Japan the concept of allowing one to “save face” is crucial, both from a cultural and legal perspective. Under Japanese law, a company is generally not permitted to dismiss an employee without first offering the individual the right to resign “voluntarily.” This is true whether the employee is being terminated for behavioral or performance issues or due to a reorganization and layoff.
Accordingly, company supervisors—some of whom may be foreign nationals—should be trained on this sensitive issue and provided latitude to deviate from standard procedures.
Understanding and navigating the cultural norms of a country and its workplaces is essential for a harmonious operation. At times, a multinational company needs to proactively override consistency in the application of its rules to allow for exceptions.
A Patchwork Quilt
Just because the world feels “smaller” thanks to its interconnected and interdependent nature, it doesn’t mean it has gotten any less complex. The reality is, in many countries labor and employment law is highly ambiguous. Simply knowing what a statute says is not enough; for a company to fully understand and, ultimately, enforce its meaning, the law must be decoded and put through a filter of cultural context by trained professionals.
Employment law remains a fundamentally local domain, which is both a challenge (ensuring compliance) and an opportunity (shaping and advancing labor and employment policy) for businesses. A critical task for corporate leaders is to sit down and carefully codify the type of culture that the organization’s entire global workforce is expected to adhere to. Armed with this foundation and working with local legal and human resource professionals, leaders can develop an employee handbook that ensures compliance with all applicable laws, includes a global code of conduct, and allows for evolution and adaptations that are acceptable based on cultural differences. Given such complexity, handbooks should not be hastily put together every few years, tucked away in a drawer and then largely forgotten. Rather, they need to be treated as critical documents and de facto mission statements for organizations. Carefully considered and effective employee handbooks form the thread stitching together a company’s geographically disparate operations into a unified, multicultural quilt and a well-run business.Stephen J. Hirschfeld is a founding partner of Hirschfeld Kraemer LLP and the CEO and founder of the Employment Law Alliance. Both organizations are based in San Francisco.
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